Japanese stocks rose for a sixth day Friday with the Topix jumping to market capitalization record. Stocks in the world’s third-largest economy rest near 15-year highs, buoyed by solid first-quarter GDP report released earlier this week.
U.S. exchange traded fund investors are taking note. To this point in Friday’s session, 28 ETFs have hit 52-week highs with five of those funds being Japan ETFs. The slumping yen is aiding the ascent of Japanese equities and the corresponding ETFs.
Over the past month the CurrencyShares Japanese Yen Trust (NYSEArca: FXY) is lower by 1.7%, indicating that investors have mistakenly pulled $13.3 million from the ProShares UltraShort Yen (NYSEArca: YCS), which tries to reflect the daily -2x or -200% daily return of the USD/JPY currency pair, this month. YCS has done a nearly perfect job of delivering double the inverse returns of FXY over the past 30 days, rising 3.36% as FXY has dropped 1.72%. [Dollar Winning Currency War]
Dollar/yen charts indicate more downside could be on the way for the Japanese currency.
“We are working on the assumption that the Bank of Japan (BoJ) will continue to test the supply/demand limits (i.e. already buying just about all of the JGB’s being issued every month), and will incrementally increase QQE and that in turn will lead to a move in the Dollar-Yen (USD/JPY) to 128-130,” said Rareview Macro founder Neil Azous in a note out this week.
Azous adds: “We derive this Yen range from simply taking the high-low of the 6 -month rectangle going back to December 2014 of 6.2 big figures and adding it the high of 122.03 back on March 10, 2015. USD/JPY is coiling and the release, and if it is to the upside, it will be greater than the range technically.”